Which of the Following Statements Is True

question 95

Multiple Choice

Which of the following statements is true?

• A) Financial theorists have resolved the issue of how to maximize firm value by altering capital structure.
• B) Firms increase their debt usage when markets overvalue the firm.
• C) Firms with a high degree of operating leverage usually maintain high debt ratios.
• D) A firm's long-term earnings are more important than its near-term cash flows in determining the amount of debt to issue.
• E) A highly leveraged firm has less flexibility to take advantage of investment opportunities than companies with low debt ratios.

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Definitions:

Increase

A situation where there is a rise in quantity, size, number, value, or intensity of a particular variable or condition.

Complementary Goods

Products or services that are used together, where the demand for one is increased when the price of the other decreases.

Demand Curve

An illustration that displays how the price of a product or service correlates with the amount people want to buy during a specific time frame.

Price

The amount in currency estimated, obligatory, or contributed as payment for something.